CASE 0:09-cv-03015-JNE-TNL Document 51 Filed 07/14/10 Page 1 of 24 UNITED STATES DISTRICT COURT DISTRICT OF MINNESOTA Jane C. Hayes-Broman, Plaintiff, v. Civil No. 09-3015 (JNE/JJG) ORDER J.P. Morgan Chase Bank, N.A., Federal Deposit Insurance Corporation as receiver for Washington Mutual Bank, F.A., Aaron McCann, Felicia McCann, Vulcan Recoveries LLC, Northern Realty Ventures LLC, Edina Realty Title, Inc., f/k/a Equity Title Services, Inc., C&M Real Estate Services, Inc., and First Minnesota Bank, Defendants. Michael T. Kallas, Esq., Kallas & Associates, Ltd., appeared for Plaintiff Jane C. Hayes-Broman. Eric D. Cook, Esq., Wilford & Geske, PA, appeared for Defendants J.P. Morgan Chase Bank, N.A., and the Federal Deposit Insurance Corporation as receiver for Washington Mutual Bank, F.A. John G. Westrick, Esq., Westrick & McDowall-Nix, PLLP, appeared for Defendants Aaron McCann, Felicia McCann, Vulcan Recoveries LLC, and Northern Realty Ventures LLC. Jack E. Pierce, Esq., Pierce Law Firm, PA, appeared for Defendant C&M Real Estate Services, Inc. Thomas B. Olson, Esq., Olson & Lucas, PA, appeared for Defendant First Minnesota Bank. Plaintiff Jane C. Hayes-Broman’s home was sold at a foreclosure sale on April 6, 2006, to Washington Mutual Bank, F.A. (WaMu), the mortgagee. This litigation arises from the actions of Plaintiff and WaMu during the redemption period; the real estate prospecting of Northern Realty Ventures LLC (NRV), Vulcan Recoveries LLC (Vulcan), and C&M Real Estate Services, Inc. (C&M); and WaMu’s failure, the Federal Deposit Insurance Corporation’s (FDIC) appointment as WaMu’s receiver, and the purchase of the majority of WaMu’s assets and certain 1 CASE 0:09-cv-03015-JNE-TNL Document 51 Filed 07/14/10 Page 2 of 24 of its liabilities by J.P. Morgan Chase Bank, N.A. (Chase). The matter is before the Court on Plaintiff’s and First Minnesota Bank’s (First Minnesota) motions for summary judgment and the joint motion for summary judgment of the FDIC and Chase. For the reasons discussed below, the Court grants Plaintiff’s motion, denies First Minnesota’s motion, and grants in part the joint motion of the FDIC and Chase.1 I. BACKGROUND A certificate of title identified Felicia and Aaron McCann as the fee simple owners of property legally described as Lot 13, Block 4, Mattock Park, Ramsey County, Minnesota (Property). On January 29, 1993, Plaintiff executed a contract for deed with the McCanns to purchase the Property. The contract for deed required the McCanns to “execute, acknowledge and deliver” a warranty deed to Plaintiff upon her “prompt and full performance” of the contract. Under the terms of the contract for deed, Plaintiff paid $8,157.65 at the time it was executed, was required to pay $7,918.59 in monthly installments to the McCanns by March 15, 1995, and agreed to assume and pay the existing mortgage of $84,923.76.2 Plaintiff assumed the mortgage in an agreement (Assumption Agreement) between her, the McCanns, and WaMu’s predecessor in interest. The Assumption Agreement did not relieve the McCanns from liability on the mortgage. Although Plaintiff paid deed “recording fees” to Edina Realty Title, Inc., f/k/a Equity 1 The McCanns, NRV, and Vulcan jointly filed a late motion for summary judgment concurrent with their memorandum in opposition to Plaintiff’s motion for summary judgment. They provided no justification for the late-filed motion, and the Court denies it as untimely filed. See Allstate Prop. & Cas. Ins. Co. v. Myllykangas, 504 F. Supp. 2d 596, 603 (D. Minn. 2007) (refusing to consider late-filed motion for summary judgment). Additionally, although counsel for C&M appeared at the hearing on the parties’ motions, C&M filed no responses to the various motions. 2 The contract for deed provided for a total purchase price of $100,000. The sum of the initial payment, the monthly payments, and the mortgage identified in the contract for deed, however, total $101,000. 2 CASE 0:09-cv-03015-JNE-TNL Document 51 Filed 07/14/10 Page 3 of 24 Title Services, Inc. (Edina Realty), the contract for deed was not registered with Ramsey County on the Property’s certificate of title. Plaintiff completed the monthly payments required by the contract for deed in 1995. In June 1996, the McCanns executed and delivered a warranty deed to Plaintiff for the Property.3 Plaintiff did not register the warranty deed. At all times relevant to this case, Plaintiff paid the property taxes and insurance for the Property. Ramsey County tax records, however, identified the McCanns as the taxpayers on the Property through 2006. Plaintiff continuously resided on the Property from January 1993 until June 2004. In June 2004, Plaintiff’s employer sent her to England for what she expected to be a temporary three-month assignment. The assignment lasted until August 2008, during which time Plaintiff’s employer leased and paid for Plaintiff’s residence in England. Although her employer considered her to be an expatriate during her time in England, Plaintiff regularly returned to Minnesota and resided on the Property. For example, according to summaries maintained by Plaintiff’s employer, she was in Minnesota for 57.5 days in 2005, 49.5 days in 2006, and 44 days in 2007. Plaintiff kept personal belongings—including her furniture, clothing, toiletries, cleaning supplies, household goods, automobile, family photographs, family heirlooms, books, and music—at the Property. Plaintiff maintained all utilities for the Property in her name, listed her name in directory assistance with the Property designated as her address, and did not have her mail regularly forwarded to England. During her absence, Plaintiff allowed her adult niece to reside on the Property rent free and without a lease agreement. 3 When the warranty deed was produced during Plaintiff’s deposition, she indicated that she could not recall having previously seen the document and that she did not remember it coming from her records. Later in the same deposition, Plaintiff was again asked if she had ever seen the warranty deed. Plaintiff responded: “If this is the document I found in my house and gave to [my attorney], then yes. If it’s not, then no.” In fact, Plaintiff had produced the warranty deed with a handwritten letter from Felicia McCann confirming the delivery of the deed. Plaintiff later clarified by affidavit that at the time of her deposition she did not recognize the document as the warranty deed. 3 CASE 0:09-cv-03015-JNE-TNL Document 51 Filed 07/14/10 Page 4 of 24 Plaintiff received eight separate notices of mortgage foreclosure by WaMu and its predecessor between 1996 and 2004. On January 4, 2005, Plaintiff brought her mortgage current with a payment of $13,057.98. Thereafter, Plaintiff missed several monthly mortgage payments in 2005. On January 19, 2006, WaMu referred the mortgage on the Property to counsel to institute foreclosure proceedings. WaMu received a check for $3,086.31 and a check for $1,028.77 from Plaintiff in February 2006. WaMu returned the payments within days by issuing checks in the same amount to Plaintiff. Plaintiff never cashed those checks.4 On April 6, 2006, WaMu purchased the Property at a foreclosure sale for $66,400.16. Nevertheless, WaMu accepted payments on the mortgage from Plaintiff on four occasions between April 2006 and August 2006 without timely returning the payments.5 While Plaintiff was at the Property on September 4, 2006, she was approached by Joe Yurecko, a representative of NRV, who offered to purchase the Property. Plaintiff declined Yurecko’s offer. Yurecko also informed Plaintiff that the Property had been sold at a foreclosure sale on April 6, 2006, and that she had until October 6, 2006, to redeem the sale.6 Plaintiff contacted WaMu and was told that her only recourse was to redeem the Property by October 6, 2006. Plaintiff could not obtain the funds by that date. However, she negotiated with WaMu through her counsel to permit her to repurchase the Property by October 11, 2006, subject to “the 4 WaMu sent checks for the same amount to Plaintiff in October 2006. Plaintiff again did not cash the checks. 5 An email exchange between Plaintiff and a WaMu representative indicates that these payments had not been returned as of September 29, 2006. 6 Plaintiff’s knowledge of her default and the foreclosure sale before her conversation with Yurecko is disputed. 4 CASE 0:09-cv-03015-JNE-TNL Document 51 Filed 07/14/10 Page 5 of 24 redemption rights of a junior lien holder if there were any.”7 Plaintiff wired the required payment to WaMu on October 11, 2006. Ordinarily, this would have ended the matter. As discussed below, however, the real estate prospecting of NRV, Vulcan, and C&M resulted in the present situation. On October 2, 2006, the McCanns quitclaimed their interest in the Property to NRV, agreeing “to convey and transfer [the Property] without warranty or title of any kind.”8 NRV registered the quit-claim deeds two days later, which canceled the certificate of title identifying the McCanns as the fee simple owners of the Property and replaced it with a new certificate of title identifying NRV as the fee simple owner of the Property. NRV then granted a mortgage on its interest in the Property to Vulcan, a company related to NRV, for $120,000. On October 6, 2006, Vulcan registered the mortgage and its notice of intent to redeem the Property as a subsequent mortgage holder. This gave Vulcan one week to redeem the Property.